How do medical schemes work?

Have you ever wondered if you’re being overcharged by your medical aid scheme?

I mean you pay and you pay, and it always seems as if you have to pay in, am I right?

I thought it would be pretty cool to know how they calculate your cost and what you get in return. So let’s dive right in, shall we?
Medical aid plans or health insurance like any other form of insurance is a form of collectivism.

“A form of what?” I hear you say. It’s sounds like Greek, but let me explain.

It simply means people collectively pool their risk. In the case of medical aid schemes, we pool our risk against the very real likelihood of incurring medical expenses that we would otherwise find difficult to pay out of our own pocket (I have one client who’s stay in intensive care cost R16, 000 for the air mattress alone!)

It’s strength in numbers – that is the key in this formula. The premiums (money you contribute) for your healthcare plan each and every month gets pooled with all the other member contributions. Together this forms a gigantic cash pot from which the medical aid fund pays out claims.

How do they know how much money is needed to cover healthcare expenses?

It’s like your company budget – what did we spend last year and what’s the shortfall for this year?

To meet budget we must either sell more

Reduce our cost, or

Increase our prices

Here is how a medical aid scheme works the budget:

Medical Aid schemes estimate the overall annual risk of its member’s healthcare expenses. They do this by looking at past history and expected increases in the cost of medical treatment moving forward.

Then they set up a finance structure (your monthly premium) to ensure that sufficient money is available to pay for the healthcare benefits which they plan on selling to you. In simple terms they analyze how much their members claim, what they claim for, and the cost of the healthcare treatment.

They then know what to charge members in terms of premiums for coverage. The higher level of coverage you require the more you pay. That makes sense because if you want access to a bigger part of the accumulated medical scheme cash pot, your contribution towards it needs to be bigger. If you are wanting access to a smaller part of the pot, your contribution needs to be smaller. That’s also why you can’t upgrade during the year.

Each year around the end of November they release their premium increases for the coming year. How the medical scheme was able to control expenses during the past year will determine how much more they are going to charge the following year. Oh and don’t forget another important factor which influences annual increases – How many members left and joined the scheme. If medical aid schemes are losing members, they either need to reduce benefits across the board or seriously hike up premiums.

Are they allowed to make a profit?

No.

Every cent in the scheme must be accounted for by the board of trustees.

They are essentially a non profit organisation (NPO) with no shareholders.

Any profit must be carried over to the next year.

The company handling the administration of the scheme is allowed to charge a fee for services rendered though.

What does my contribution to the scheme pay?

The bulk of the premium is used to cover hospitilization because this is the major risk area. More and more medical aids are going the route of splitting your contribution into a portion that pays for ‘in’ and ‘out’ of hospital medical costs.

In hospital expenses would be any treatment you received while admitted into hospital.

An out-of-hospital expense would be things like:

Doctors,

dentists

Over the counter (OTC) medication from a pharmacy, and

a visit every now and again to your optometrist.

Most medical aids go the route of providing you with an MSA (Medical Savings Account) to fund your day-to-day or out-of-hospital expenses. A portion of your monthly premium is allocated to this and from which you then pay your expenses. You get to control this money yourself.

Are any benefits limited?

Yes. Some benefits are always limited because there isn’t an endless supply of money available within the scheme. The benefits and limits will be based on the medical aid plan type that you have chosen.

Like I mentioned earlier, your coverage will be dependent on your contribution towards the scheme. The more comprehensive the medical aid plan the better the benefits, and the more you are going to pay. The less comprehensive the plan type, the less you will pay and fewer benefits will be available to you. There are certain benefits that everyone claims for heavily on medical aid schemes and these benefits are almost always capped.

Let’s take dentistry for an example.
Firstly it’s an expensive medical procedure and every member wants healthy teeth. The medical aid scheme however can’t simply pay every claim that gets submitted for dentistry. They would simply go bankrupt. The scheme allocates a certain amount of money to dentistry based on the plan type you have chosen and limits the total spend on dentistry across the scheme annually.

Isn’t there certain coverage that everyone is entitled to regardless of plan choice?

Of course. Prescribed Minimum benefits (PMB’s) were introduced in line with the National Health policy because it was felt that the extent of cover offered by South African Medical Schemes fell short of actual benefits offered by other health services around the world.

They cover a wide range of emergency treatments and chronic illnesses. You can view this PMB’s by visiting the Council for Medical Schemes website. Regardless of your medical aid plan, you’re entitled to these benefits.

Why not take my poll right now. You can select up to two answers.

18 Comments

Irene
on 9 April 2010 at 07:34

Is it legal for them to exclude you from cover for a PMB or Chronic condition? Surely if you have the condition and are on a medical aid scheme and CMC has designated certain conditions that have to be covered they can't deny you treatment for that condition?

Thanks for your comment and good question. No, you can't be excluded from PMB's (Prescribed Minimum Benefits), but legislation does allow options to schemes to ensure that the costs associated with PMB's are manageable. Schemes can appoint designated providers, have formularies (medicine lists) and algorithms (sets of treatment plans) in place and only fund treatment and care costs that fall within certain protocols. So the bottom line is while you are entitled to these minimum benefits you might still need to meet the criteria laid out by the scheme and work within their parameters. On the chronic benefit side of things, same applies. If you meet the qualifying criteria, no problem in having the condition covered and the associated costs paid.

what can I do if I cant pay the 300 percent the doctors charge on top of my medical aid payments? The doctors only informed me after the procedure that I have to pay an additional R 56 000-00 which I cant afford. Why have medical aid when you pay so much additional fees? Why pay medical aid every month and when you really need it you still cant afford the expenses…

Can I still claim for an injury after moving to a new medical aid.eg I broke my arm and the pins needs to be removed. Medical aid A paid for the operation to insert the pins. I moved to medical Aid B in the new month where I need to remove the pins. How do I go about the process

I’ve got a problem, I was injured last year and admitted to hospital. since I was injured at the work function my employer took me to hospital and tell the hospital to submit the claim to the compensation fund, in that sense the medical aid was not contacted for pre authorisation. later in a month the compensation fund rejected my claim and I had to turn to medical aid to pay my hospital stay as well as the Doctor’s bill for operation. Now the medical aid as well is rejecting my claim saying their policy state that they should receive pre authorisation within 48 hours of my admission. What can I do to get them understand that the reason for not calling was not like we were negligent but it was the impression we get from the employer that I mustn’t claim from my medical aid.
please advise;

I sympathise with your situation.
I would request a copy of the rules to confirm what you were told over the phone. However, if the rules do indeed state this, then from my experience they won’t budge on their decision.

In future make certain by notifying your medical aid and getting authorisation regardless of whether its a workman’s compensation claim. If the medical aid refuses to give authorisation and says that its a workman’s compensation issue, then ask for a reference number so that you can take this up with them later if workman’s compensation refutes the claim.

Thanks Lawrence, I’ve seen that they don’t budge, I really wish there was a way out of this situation and my employer was assisting in this regard. I’m facing this huge medical bill and I wish I knew better then.

herewith is the Discovery rule for pre authorisation. The Discovery Health Hospital Benefit will
cover you, if you are admitted to hospital
and Discovery Health has confirmed your
admission and treatment for a planned
procedure.
Members must obtain pre-authorisation
In the event of a planned procedure,
contact Discovery Health 48 hours
before the hospital admission to obtain
a pre-authorisation number. Should you
not contact Discovery Health for preauthorisation
before a planned event,
Discovery Health will only pay 70% of the
costs that they would normally cover.
In an emergency, go straight to hospital
but ensure that either you or a family
member calls Discovery Health within
12 hours of admission.
What is a medical emergency?
A medical emergency is the sudden,
unexpected onset of a health condition
that needs immediate medical or surgical
treatment. If this treatment is not
provided, the persons life would be at risk
or it may result in serious impairment or
dysfunction of an organ or a body part,
or would place the person’s life in serious
jeopardy in line with the Scheme’s rules

So if you didn’t get pre-authorisation then they should have paid at least 70% of the bill.
I think this has more to do with late submission of the claim than anything else.
The other possible reason is that it’s a workman compensation claim in their view.
I’d suggest calling Discovery again.

thank you very much for your respond, I think I should start questioning them about the 70% payable, and as for the Workman compensation i’ll get my employer to contact Discovery of write a letter confirming that the workman compensation has rejected the claim and I won’t be claiming twice.
thank you, this is been bothering me and now I’m a bit positive.

Chanell Trollip
on 7 August 2015 at 11:39

Good Morning,

My brother in law retired and is currently paying R4,000 for medical for himself, his wife and their 2 children (Ages 2 and 12). Is there maybe someone that can assist me in getting a cheaper medical aid for them that include consultation and a hospital plan?

I’d suggest visiting the various medical aid websites and downloading their brochures to compare plans and pricing. Or has he considered staying with the same scheme but downgrading his benefits?
But be careful, one scheme might be cheaper than another, but what they pay when you end up in hospital might not be as much as what a more expensive one pays.

Send me an email with his medical aid information and I’ll see if I can assist.Our contact details are on the home page.

Hi. We have a friend who was involved in an accident and the RAF are dragging their feet with a payout. Will she be able to join a medical aid now, with her pre existing injuries that need surgery, for instance a hip and knee replacement?

I am a very logical person who works with his hands. No matter how hard I try, I can not understand the concept of how my medical aid works. i.e. savings, threshold etc. Is there perhaps an explanation which graphically outlines how medical aid works or maybe “Medical Aid for Dummies”

Savings accounts and thresholds are there to encourage you to take charge of your medical expenses.

Think of medical aid as a big pot to which we all contribute. If I’m contributing the same as you but I’m claiming double the amount you are, then there’s a problem.
Medical aid schemes try to manage this problem by giving you a set amount for the services most open to abuse.No one is going to book in for a triple bypass voluntarily, but if I can get the medical aid to pay for my cosmetic dentistry, then why not?